Accounting -The Corporation’s budgeted sales are $600,000

| January 30, 2017

Question

1) The Corporation’s budgeted sales are $600,000, its budgeted variable expenses are $420,000, and its budgeted fixed expenses are $120,000. The company’s break-even in dollar sales is:

a. $ 60,000

b. $ 180,000

c. $ 400,000

d. $ 480,000

2) The ratio of fixed expenses to the unit contribution margin is the:

a. break-even point in unit sales.

b. operating profit.

c. contribution margin ratio.

d. margin of safety.

3) For an item (cost or revenue) to be relevant to a decision, it must:

a. Be an expected, future item.

b. Differ among alternatives.

c. Meet one OR the other of the criteria mentioned in (a) and (b), above.

d. Meet BOTH of the criteria mentioned in (a) and (b), above.

4) We have a snow cone stand near the football stadium. To plan for the future, it wants to determine its cost behavior patterns. It has the following information available about its operating costs and the number of snow cones served.

Month

Number of snow cones

Total operating costs

January

6,400

$5,980

February

7,000

$6,400

March

6,200

$5,840

April

6,900

$6,330

May

7,600

$6,820

June

7,250

$6,575

Using the high-low method, the monthly operating costs—if MSU sells 8,000 snow cones in a month—are

A) $7,100.

B) $5,600.

C) $10,920.

D) $1,500.

5) The company produces 1,000 parts per year, which are used in the assembly of one of its products. The unit product cost of these parts is:
Variable Manufacturing Cost —– 12

Fixed Manufacturing Coat ———— 9

Unit Product Cost ———————- 21

The part can be purchased from an outside supplier at $20 per unit. If the part is purchased from the outside supplier, two thirds of the fixed manufacturing costs can be eliminated. The annual impact on the company’s net operating income as a result of buying the part from the outside supplier would be:

a. $1,000 increase.

b. $1,000 decrease.

c. $5,000 increase.

d. $2,000 decrease.

6) A study has been conducted to determine if one of the departments in MSU Company should be discontinued. The contribution margin in the department is $50,000 per year. Fixed expenses charged to the department are $65,000 per year. It is estimated that $40,000 of these fixed expenses could be eliminated if the department is discontinued. These data indicate that if the department is discontinued, The overall net operating income would:

a. decrease by $25,000 per year.

b. increase by $25,000 per year.

c. decrease by $10,000 per year.

d. increase by $10,000 per year.

70 We sells two products, Big models and Small models. Small models sell for $42 per unit with variable costs of $30 per unit. Big models sell for $50 per unit with variable costs of $40 per unit. Total fixed costs for the company are $75,400. We typically sells four Small models for every Big model. What is the break-even point in total units?

A) 6,500 units

B) 3,900 units

C) 9,921 units

D) 5,953 units

8) We manufactures seats for trains. The company has the capacity to produce 100,000 seats per year, but is currently producing and selling 75,000 seats per year. The following information relates to current production:

Sale price per unit

$400

Variable costs per unit:

Manufacturing

$220

Marketing and administrative

$50

Total fixed costs:

Manufacturing

$750,000

Marketing and administrative

$200,000

If a special sales order is accepted for 3,000 seats at a price of $300 per unit, and fixed costs increase by $10,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)

A) Decrease by $80,000

B) Increase by $230,000

C) Increase by $90,000

D) Increase by $80,000

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